The state of Australia: health

We’re unlikely to solve persistent challenges to the health system, such as ensuring equitable access to well-coordinated care, with quick fixes. AAP Image/Quentin Jones

In the lead-up to the budget, the story of crisis has been hammered home, but there’s more to a country than its structural deficit. So how is Australia doing overall? In this special series, ten writers take a broader look at the State of Australia; our health, wealth, education, culture, environment, well-being and international standing.


In the lead up to this year’s federal budget, the government has been telling us short-term budget pain is needed to secure our long-term economic future.

The release of the National Commission of Audit report last week reinforced the government’s message that we need to do something more than tinker around the edges to get our economy back into shape.

But is Australia’s health system so bad it needs some kind of shock therapy to ensure it meets our future needs?

How are we doing now?

In 2011-12, Australia spent 9.5% of GDP on health, just higher than the OECD average of 9.3%. Twenty years ago, Australia spent 7.1% of GDP on health, which was about the OECD average. These figures somewhat undermine the argument that we have a crisis in health spending.

When you take a look at the headline indicator for health status, life expectancy, Australians are doing fairly well by global standards. In 2011, the average life expectancy for all Australians was 82 years, making us the seventh longest-living people among OECD nations.

There are some concerns, however, that we might not be living such long lives in the future. In 2011, Australians drank a little more alcohol than the OECD average (ten versus 9.3 litres per person per year). And we’re also a lot fatter: 21% of the population report being obese, compared with an OECD average of 15%.

While these indicators and global comparisons are useful high-level measures of our health system’s effectiveness, we need to get beyond averages to find the true picture.

More Australians are obese than the OECD average. Olivier Le Moal/Shutterstock

Most people know – whether from personal experience or just watching the news – that our health system does not serve us all equally well. Some people cannot get access to essential health care, such as pharmaceuticals, general practitioners or dentists, when they need it simply because of cost.

Other people, especially those living in rural and remote areas, struggle to get access to services close to home.

And with some types of elective surgery and cancer services now predominately done in private hospitals, people without private health insurance can find themselves waiting for an excessively long time for treatment.

If the care you get depends to some extent on where you live, what you earn or whether or not you have private insurance, we have a problem with equitable access to care. And it’s a serious one too because there is strong evidence showing the people in most need of health care are the ones least able to afford it.

Getting timely access to care is one thing, but the quality of it matters too. In an international survey by the Commonwealth Fund, Australia’s performance was patchy on a series of quality measures.

When compared with seven other developed countries (including the United States, United Kingdom and New Zealand), Australia ranked sixth overall on a series measures looking at medical errors.

We ranked fourth on how well care was coordinated between different health professionals and third on how well care was centred around patient’s needs and preferences.

How we got here - past reforms

Medicare is the foundation of the Australian health system. The scheme, now 30 years old, is funded partly through our progressive tax system, and this is one of the key reasons our health system is considered to be relatively equitable. While Medicare has served us well, the time is right to consider reforms.

Medicare was originally developed to help people get access to basic medical and hospital care; in the 1960s when the scheme was conceived, most people suffered from relatively straightforward acute health conditions (infections, for instance, and traumatic injuries). Treatment from GPs, medical specialists and public hospitals was often all people needed to be cured.

Now, with more than seven million Australians having at least one chronic disease, people’s health needs are more complex. For some, a basic level of care might mean being treated by a GP, physiotherapist, dietitian, occupational therapist and an array of medical specialists. Medicare now funds a limited range of non-medical services, but much of what people need still falls outside its scope.

Australia’s 30-year-old Medicare system needs reform. AAP Image/Dave Hunt MEDICARE

Medicare also works on an insurance model, with patients reimbursed for each visit to the doctor, and doctors paid largely on a fee-for-service basis. This model works reasonably well for one-off visits to the GP, but provides few incentives for health-care providers to work co-operatively and ensure patients receive coordinated care.

Over the last 20 years or so, federal and state governments have tried many different ways of improving the coordination of care. Some focused on reforms to financing health care, for example, the coordinated care trials of the 1990s.

Others have tried to improve coordination by making changes to the governance of the health system at the local level – the more recent establishment of Medicare Locals is an example.

In some areas, the long struggle to improve the coordination of care is starting to pay off, but these successes have yet to be replicated cross the country.

What’s next?

The National Commission of Audit report recommended some major changes to the structure and operation of our health system, and a 12-month period to review some of the proposals it outlined. But before the government looks at them in any detail, it’s important to recognise the limits of what Medicare, or any health system, can do to improve the length and quality of people’s lives.

It is well established that health services are just one of many factors that influence health outcomes. Other important determinants of health include the social, economic and physical environment, and people’s individual characteristics and behaviours. To improve the health of Australians, governments will also need to make gains in some of these other areas that determine health outcomes.

Health systems, however, do have an influence on health outcomes. A large study of 136 countries found that there was a correlation between rates of death and certain health system variables. Countries with more doctors, lower out-of-pocket costs, and higher total expenditure, for example, had lower premature death rates at the national level.

When you take a look at the headline indicator for health status, life expectancy, Australians are doing fairly well. Mercy Health/Flickr, CC BY-NC-ND

While this study includes many less wealthy countries than Australia, it shows that the design and operation of our health system does matter, even to headline indicators such as mortality.

The Australian health system clearly has some problems that need to be addressed, but they are long-standing ones, and ones shared by most other OECD countries.

We are unlikely to solve persistent challenges, such as ensuring equitable access to well-coordinated care, with quick fixes (we have tried most of them before). Nor are they likely to be solved by reforms naïvely borne out of economic theory, or imported holus bolus from other countries.

To improve Australia’s health system, we need to carefully consider a range of reforms and evaluate their potential to solve the most important problems we face (and this is not overall health expenditure).

If we don’t, we will simply add to the growing pile of overly ambitious reform proposals that have fallen by the wayside and made no difference at all.


Further reading: The State of Australia series

The Future of Medicare Conference opens on 13th August in Sydney.